US stocks are unloved, unwanted

Investors pulling money out of US stocks in favor of bonds, emerging markets.

By Kim Peterson Mar 9, 2010 1:34PM
Find hot stocks © Digital Vision / Getty ImagesInvestors hate U.S. stocks.

That's the finding of The Wall Street Journal, which says that investors around the globe have pulled $15.3 billion out of U.S. stock funds so far this year. Instead, they're putting money into emerging markets and U.S. bond funds.

"This is a far different pattern than in the wake of other recent bear markets, where investors had viewed market declines as a chance to buy cheap stocks that would inevitably rise," writes Tom Lauricella.

Turns out, it's not the stocks that are unappealing so much as the environment surrounding them. Investors are concerned with uncertainty in Washington, in the economy and in housing, Lauricella writes.

One financial adviser tells the paper he's worried about income-tax rates, estate-tax rules, dividend taxes and health care costs.

But lately, investors may be starting to come around to homegrown stocks. The latest numbers show that U.S. equities took in more than $5 billion in mid-February. But high-yield bond funds said goodbye to $1.7 billion.

A survey of financial advisers by Charles Schwab showed less interest in bonds now compared to last year. But they weren't hot on U.S. stocks either, with only 26% planning to buy more large caps compared to 30% last summer, according to the Journal.

Some believe investors will return to U.S. stocks just at the time when interest rates start to rise, typically a weak period for stocks. The logic is that bonds will get hit by rising interest rates and the decision to raise rates will mean the U.S. economy is on solid footing, in particular the job market.

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